European Development Cooperation Strategy for Cambodia 2014-2018 - November 2014
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V
European Development Cooperation
Strategy for Cambodia 2014-2018
November 2014Joint programming is a direct result of European partners’ longstanding internal and international commitments to delivering better aid and development results through greater internal coherence and efficiency in the face of proliferation and expansion of development activities. Joint programming is a process whereby the European partners take strategic decisions based on a comprehensive view of European and other donors’ support to Cambodia. It includes a joint analysis and response to the partner country’s national development strategy, defining an in-country division of labour among the European partners and presenting indicative financial allocations per sectors and per partner. Joint programming respects all European partners' sovereign decisions related to the final level of financial allocations for Cambodia and implementation modalities to be adopted. The European joint programme does not therefore encompass the bilateral implementation plans of individual European partners. However, it does allow European partners to substitute their individual country strategies with this European Development Cooperation Strategy as appropriate.
FOREWORD
This European Development Cooperation Strategy for Cambodia 2014-2018 reaffirms the European
partners’ commitment to supporting Cambodia in continuing its impressive social and economic
development, making faster progress towards achieving Cambodia Millennium Development Goals and
actively participating in the global post-2015 development agenda. At the same time, we recognise that
a number of challenges related to democratic governance remain.
This strategy reflects the importance that we place on joint collaboration and partnerships as catalysts
for achieving results and increasing effectiveness of our joint development efforts. It is for this reason
that ten European development partners active in Cambodia – the Czech Republic, the European Union,
Finland, France, Germany, Ireland, Italy, Sweden, Switzerland and the United Kingdom – have come
together to produce this joint strategy which details our joint priorities, planned programmes and
associated framework for monitoring results.
The priority areas of the European Development Cooperation Strategy for Cambodia 2014-2018 are
based on the consideration of the Royal Government's development priorities, on our shared values and
principles, on the lessons learned from the previous European development cooperation and on the
European partners’ comparative advantage.
The Royal Government of Cambodia has set an ambitious target of becoming a prosperous upper
middle-income country by 2030. With this strategy, we demonstrate how we plan to work together to
build upon the priorities and analysis embedded in the Royal Government’s Rectangular Strategy - Phase
III and in the National Strategic Development Plan and to help Cambodia achieve these goals. By working
together, we hope to generate greater synergy through our shared understanding of Cambodia’s
development priorities and articulation of a consistent set of messages.
The Royal Government adopted a vision of a prosperous society with a strong economy that is
diversified, dynamic, and resilient, and where there is an equitable distribution of opportunities.
European partners share this vision, recognising that development needs to be country-led with an
overarching focus on poverty reduction and sustainable development founded on democratic values.
We also wish to build on our comparative advantages derived from the strengths and experiences of
each of the European partners, acquired both in Cambodia and globally. Our long-standing experience in
applying policy coherence for development and using a wide range of instruments in policy areas such
as environment, trade, the information society and immigration will further enable synergy, consistency
and maximum effective use of our resources for promoting development.
This Strategy provides the overall direction for European development cooperation programmes and
defines the division of labour between the European partners. We hope that the implementation of the
Strategy will further consolidate and streamline European cooperation with Cambodia and will therefore
also contribute to increasing the coherence and impact of our aid.
iWe acknowledge the efforts and contributions made by the European Development Counsellors over
the past eighteen months to formulate this document in a consultative and evidence-based manner,
learning from experiences of the past European development cooperation and building on views of all
stakeholders in Cambodia to ensure we effectively support Cambodian development efforts and
achievement of equitable and sustainable development.
We are looking forward to implementing this strategy in close partnership with the Royal Government
of Cambodia, civil society, private sector and other development partners.
Phnom Penh, 20th November 2014
Vítězslav Grepl Jean-François Cautain
Ambassador of the Czech Republic Ambassador of the European Union
Kirsti Westphalen Jean-Claude Poimbœuf
Ambassador of Finland Ambassador of France
Joachim Baron von Marschall Damien Cole
Ambassador of the Federal Republic of Germany Ambassador of Ireland
Francesco Saverio Nisio Anna Maj Hultgård
Ambassador of Italy Ambassador of Sweden
Christoph Burgener William Longhurst
Ambassador of Switzerland Ambassador of the United Kingdom
iiCONTENTS
FOREWORD ................................................................................................................................................ i
CONTENTS ................................................................................................................................................ iii
LIST OF ABBREVIATIONS ........................................................................................................................... v
INTRODUCTION ......................................................................................................................................... 1
1. DEVELOPMENT CONTEXT...................................................................................................................... 3
1.1 Cambodian MDG Achievements ..................................................................................................... 3
1.2 Progress on Key Reform Areas ........................................................................................................ 7
1.3 Drivers of Change ............................................................................................................................ 9
2. FOUNDATIONS OF THE EUROPEAN DEVELOPMENT COOPERATION STRATEGY ................................ 11
2.1 Royal Government's Development Vision and Framework .......................................................... 11
2.2 Shared Values and Principles ........................................................................................................ 12
2.3 Policy Coherence for Development .............................................................................................. 13
2.4 European Partners' Comparative Advantage................................................................................ 14
2.5 Lessons Learnt From Previous Development Cooperation........................................................... 15
3. EUROPEAN DEVELOPMENT COOPERATION PRIORITIES ..................................................................... 18
3.1 Support for Governance - The Core of the Rectangular strategy ................................................. 18
3.2 Support for Promotion of THE Agriculture Sector, including Rural Development (Rectangle 1) . 19
3.3 Support for Development of Physical Infrastructure (Rectangle 2).............................................. 21
3.4 Support for Private Sector Development and Employment Generation (Rectangle 3) ................ 22
3.5 Support for Capacity Building and Human Resources Development (Rectangle 4) ..................... 22
4. ESTIMATED FINANCIAL PROJECTIONS 2014-2018 .............................................................................. 24
5. DIVISION OF LABOUR .......................................................................................................................... 27
6. MONITORING AND EVALUATION ........................................................................................................ 29
6.1 Managing for Results .................................................................................................................... 29
6.2 Monitoring and Evaluation ArrangEments ................................................................................... 29
iiiANNEX A: DEVELOPMENT EFFECTIVENESS AND COORDINATION MECHANISM IN CAMBODIA ............ 31
ANNEX B: EUROPEAN NON-BILATERAL POLICIES AND PROGRAMMES .................................................. 34
ANNEX C: LESSONS LEARNED FROM PREVIOUS DEVELOPMENT COOPERATION ................................... 38
ANNEX D: RESULTS MATRIX .................................................................................................................... 41
ivLIST OF ABBREVIATIONS
ADB Asian Development Bank
AfT Aid for Trade
ASEAN The Association of South-East Asian Nations
BE Belgium
CDC Council for the Development of Cambodia
CDCF Cambodia Development Cooperation Forum
CDPF Capacity Development Partnership Fund
CH Switzerland
CMDG Cambodian Millennium Development Goal
CRDB Cambodian Rehabilitation and Development Board
CSES Cambodia Socio-Economic Survey
CZ Czech Republic
DE Germany
EBA Everything But Arms
ECCC Extraordinary Chambers in the Courts of Cambodia
EITI Extractive Industries Transparency Initiative
EMIS Education Management Information System
EU European Union
EUD EU Delegation
FAO Food and Agriculture Organisation
FDI Foreign Direct Investment
FI Finland
FLEGT Forest Law Enforcement, Governance and Trade
FMIS Financial Management Information System
FR France
GAVI Global Vaccine Alliance (formerly known as Global Alliance for Vaccines and
Immunization)
GDCC Government-Development Partner Coordinating Committee
GFATM The Global Fund for Fighting HIV/AIDS, Tuberculosis and Malaria
GSP Generalised System of Preferences
HoM Head of Mission
vHU Hungary
ICT Information and Communication Technologies
IE Ireland
IMF International Monetary Fund
IT Italy
JMI Joint Monitoring Indicator
KHR Cambodian Riel (currency)
LDC Least Developed Country
MAFF Ministry of Agriculture, Forestry and Fisheries
MBPI Merit-Based Pay Initiative
MDG Millennium Development Goal
MEA Multilateral Environmental Agreement
MEF Ministry of Economy and Finance
MFAIC Ministry of Foreign Affairs and International Cooperation
MIC Middle Income Country
MLMUPC Ministry of Land Management, Urban Planning and Construction
MoI Ministry of Interior
MoP Ministry of Planning
MoWA Ministry of Women’s Affairs
MSME Micro, Small and Medium Enterprises
NBP National Biodigester Programme
NGO Non-Governmental Organisation
NSDP National Strategic Development Plan
ODA Official Development Assistance
P&H Partnership and Harmonisation
PAR Public Administration Reform
PFM Public Financial Management
PFMR Public Financial Management Reform
PIP Public Investment Programme
POC Priority Operating Costs
RGC Royal Government of Cambodia
SE Sweden
SNDD Sub-national Democratic Development
TVET Technical and Vocational Education and Training
viTWG Technical Working Group
UK United Kingdom
UNDP United Nations Development Programme
UNESCO United Nations Education, Science and Culture Organisation
UNFPA United Nations Population Fund
USD United States Dollar
USG United Studies Group
UXO Unexploded Ordnance
VET Vocational Education and Training
WB World Bank
WTO World Trade Organisation
viiINTRODUCTION
European development partners active in Cambodia namely the European Union and its Member States
active in Cambodia: the Czech Republic, Finland, France, Germany, Ireland, Italy, Sweden and the United
Kingdom; and Switzerland are committed to reducing and eradicating poverty as the primary aim of
their development cooperation.
This European Development Cooperation Strategy for Cambodia 2014-2018 establishes a joint long-
term vision for European partners' development cooperation in Cambodia and reaffirms European
partners' commitments to supporting Cambodia and responding to the country's needs as identified by
the Royal Government of Cambodia.
This European Strategy relates primarily to the European partners' bilateral development cooperation
programmes in Cambodia in the period 2014-2018. European partners' however also provide funding
through other programmes, including thematic, regional, academic, humanitarian as well as through
multilateral cooperation with a range of international institutions. Thus, European partners’ funding
envelope in Cambodia in the five years period covered by the strategy is estimated at EUR 1.4 billion
(nearly USD 1.8 billion)1.
European partners believe that developing countries are mainly responsible for their own development,
based on national strategies to which European development programmes should be aligned. This
European Strategy is thus aligned to the Royal Government’s Rectangular Strategy-Phase III which
represents the socio-economic policy agenda of the Royal Government of Cambodia with its four
strategic objectives of growth, employment, equity and efficiency. In turn, the National Strategic
Development Plan 2014-2018 (NSDP) is expected to translate these strategic objectives into a national
implementation plan with associated results framework.
The strategic goals of this European Strategy are to work in partnership with the Royal Government of
Cambodia and other partners to reduce poverty; enable equitable and sustainable growth and
development; foster respect for human rights, democratic participation and an active civil society in
Cambodia; and improve the effectiveness and impact of development cooperation. This joint European
Strategy therefore builds on an existing strong, long-term and close cooperation amongst European
partners active in Cambodia and between European partners and the Royal Government of Cambodia.
The strategy also draws on the experiences of previous development cooperation programmes
implemented successfully by European partners in partnership with the Royal Government of Cambodia.
The priority areas for European development cooperation include the following:
Social development – including education and health;
1
All financial information provided in this document is in the form of indicative estimates only and does not represent a formal
commitment by any of the European development partners concerned
1 Supporting sustainable and equitable economic growth – including support for agriculture and
food security, rural development, spatial planning, vocational training, skills development, trade
facilitation and supporting banking and business services;
Infrastructure - both in urban and in rural areas, including electricity transmission and
distribution, water supply, roads, irrigation schemes, lighting, waste management, sanitation
and drainage, public transportation and other economic infrastructures;
Governance and Cross-cutting issues – including the key cross-sector governance reforms of
Public Financial Management (PFM), Public Administration Reform (PAR) and Sub-national
Democratic Development (SNDD) and for the promotion of cross-sector issues of human rights,
gender equality, disability, climate change, civil society development and promotion of culture
and arts.
The European Strategy is informed by the values, goals, principles and commitments shared by the
European partners and the Royal Government of Cambodia, including the principle of country-led
poverty reduction and the achievement of the Millennium Development Goals, respect for human
rights, democracy, fundamental freedoms and the rule of law, and space for a vibrant participation by
civil society in national development policies and programmes.
The European Development Cooperation Strategy for Cambodia 2014-2018 sets out the priorities for
future European partners' development cooperation defines the sectoral division of labour and
provides indicative financial allocations per sector and per partner for the period of the strategy, using
the Cambodian Government's Official Development Assistance (ODA) sector classification. This
document does not however go into details of how individual European partners will carry out their
work in the agreed sectors and areas and which modalities and implementing partners they would use.
Such issues will be elaborated in the bilateral implementation plans that each European partner will
develop according to their internal rules and procedures. These bilateral implementation plans will
nevertheless be guided by and aligned to the commitments set out in the European Strategy document,
in terms of sector focus, indicative financing and duration.
This Strategy has been prepared in consultation with the Royal Government of Cambodia, civil society,
other development partners and the private sector and it seeks to ensure coherence with the Royal
Government's Development Cooperation and Partnerships Strategy 2014-2018.
This Strategy represents a reference guide for all non-resident EU Member States who have
programmes or may begin new development cooperation in Cambodia in the period of the strategy’s
implementation, to ensure coherence among all European programmes.
21. DEVELOPMENT CONTEXT
Cambodia is on track to meet most of the MDGs. Economic activity remains strong driven by robust
garment exports, tourism, and construction, despite a slow global recovery. The country has managed to
sustain high economic growth despite the global economic downturn, to significantly reduce poverty
and to improve critical social indicators in health and education.
Cambodia is ranked as the nineteenth fastest growing economy in the world according to the World
Bank's Global Economic Prospects report (2014). Cambodia is ranked fourth among developing countries
of the world in achieving the MDGs according to the Centre for Global Development MDG Progress
Index. (2013)
1.1 CAMBODIAN MDG ACHIEVEMENTS
The Royal Government of Cambodia adapted the eight universally agreed MDGs. In addition, the Royal
Government recognised that an additional and specific major constraint on development in the country
is the continued contamination of land by mines and unexploded ordnances (UXO), hence the
Government added de-mining, UXO and victim assistance as Cambodia's ninth MDG.
CMDG 1: Eradicate extreme poverty and hunger
The share of population living below the national poverty line has been drastically decreased. Cambodia
has achieved a drastic decline in poverty - more than 50 percent from 2007 to 2011. This makes
Cambodia one of the countries with the highest rate of poverty reduction worldwide in recent years.
However, despite this success, most families have only been lifted out of poverty by a small margin, and
instead of being poor are now near-poor and at a high risk of falling back into poverty at the slightest
income shock. An average loss of just KHR 1,200 in income per day (approximately USD 0.30) would
push 3 million near-poor Cambodians back into poverty, doubling the country’s current poverty rate
from 20.5 percent to about 40 percent2.
Moreover, while poverty reduction is on track, much of the population is still below the poverty line and
inequality remains high - widely varying growth rates in income across provinces and districts will
require targeted regional development policies. The threshold between the informal sector poor and the
near-poor population is blurred; with the latter facing a severe risk of impoverishment in times of crisis,
such as increased health expenditures. Further clarity is therefore needed regarding social protection
policies and programmes for the near poor.
An important indicator that is off track is reducing malnutrition. Child nutrition and poor sanitation
remain key issues affecting cognitive development, health, and poverty alleviation. Tackling nutrition
however requires a multi-sectoral approach, including improved maternal and child care practices;
increased diet diversity; increased agricultural productivity and diversity, better access to credit;
increased and equitable access to clean water; improved sanitation and increased access to relevant
2
WB (2013) Where have all the poor gone?, Cambodia Poverty Assessment, The World Bank, November 2013
3health services. Cross-sector and inter-ministerial cooperation in this area has proven challenging in the
past.
CMDG 2: Achieve universal nine-year basic education
Cambodia is on target to achieve its goals to achieve universal primary education. The Royal
Government has been successful with first-order reforms in education that have increased enrolment
rates in primary schools. The gender parity index is 0.996, and regional disparities have been almost
eliminated except for Rattanakiri province in Cambodia’s northeast.
Efforts need to be directed to improving the flow rates in primary education: the repetition rate and
drop-out rates have not shown much progress in decreasing and the targets for lower secondary schools
cannot be achieved until primary flow rates are improved. There are also large regional differences in
lower secondary school completion, however the gender parity index is higher than 1, at 1.120. Overall,
despite increases in enrolment, progress in youth literacy is lower than expected. UNESCO data shows
(based on EMIS and Cambodia Socio-Economic Surveys (CSES)) that the literacy rate for the age group
15-24 years has improved from 76.3% in 1998 to 87.5% in 2008, and is reported to be 97.6% in 2012.
CMDG 3: Promote gender equality and empower women
Gender parity in upper secondary school is almost on track, whilst in tertiary education it is slightly off-
track. The ratio of literate females to males for 15-24 year olds is on track, however for 25-44 year old
women, it is off track, which requires some attention as this will have impacts on poverty, health and
education outcomes in the near future.
Persistent gender power imbalances, stemming from conservative traditional norms in Cambodia which
value women less than men, lead to poverty, illiteracy, gender discrimination, and other obstacles that
prevent women from effectively participating in Cambodia’s development. Gender-based violence and
trafficking in persons for both sexual and labour exploitation remain serious problems and require
greater attention.
Women in Cambodia are important economic actors, often responsible for the production and
marketing of products. Nevertheless, they are historically underrepresented in decision-making and
leadership capacities. Moreover, it is much more difficult for women to obtain business loans, and this
financial constraint keeps women in poverty. Some progress has been achieved in women's political
representation however; women are still underrepresented in top decision-making positions and in the
National Assembly.
CMDG 4: Reduce child mortality
Remarkable progress has been made on key health indicators related to child mortality and infant and
under-five mortality where many targets have been met or exceeded. Wide regional variations however
still need to be addressed.
4CMDG 5: Improve maternal health
Maternal mortality also declined significantly exceeding the 2015 revised target. Further progress in
CMDG 5 requires a continued improvement in access to health care and family planning services,
increasing the number of trained health personnel, conducting information campaigns and addressing
the inadequate family practices and care-seeking behaviour during pregnancy and childbirth.
CMDG 6: Combat HIV/AIDS, malaria and other diseases
Deaths from malaria and the HIV prevalence rate amongst the adult population in Cambodia have been
significantly reduced. Notable progress has been achieved in providing a growing share of the eligible
population with antiretroviral therapy. Cambodia is one of only six countries with low and concentrated
epidemics of HIV/AIDS that has achieved universal access in 2011: commonly understood as the
provision of antiretroviral therapy to at least 80 per cent of the people who need it. Most developing
countries are far from achieving this goal.
CMDG 7: Ensure environmental sustainability
In the area of conservation and protection of natural resources, Cambodia has experienced some
modest gains. Legal frameworks and national strategic plans are now in place for natural resource
management and the numbers of Community Based Forestry groups and Community Fishery Groups
have significantly increased over the last decade although the formal registration process for these
groups remains slow. In addition, both rural water and sanitation are on track to meet the targets. In
land titling, current progress is below the projected target, but the pace of registration significantly
increased in 2012 through dedicated land campaigns.
Both protected areas and forests remain under severe pressure from illegal logging, encroachment,
economic land concessions and insufficient numbers of rangers. As a consequence, forests and
protected areas have suffered losses with the forest cover remaining below 60%. In addition, formal
registration process of Community Based Forestry and Community Fishery Groups are slow and must be
accelerated. The proportion of households dependent on fuel wood has not decreased as planned and
remains very high.
Securing sustainable management of Cambodia’s natural resources capital base is challenging due to a
combination of many interlinked factors, including increasing pressures from rapid population growth,
expansion and intensification of agriculture as well as developments in transport, energy etc. without
appropriate spatial and land use planning and risk mitigation measures. Combined with shortcomings in
legal clarity, law enforcement, and land rights, these pressures have led to an unsustainable exploitation
of natural resources, inequitable benefit sharing, and conflicts over access and use rights. Hence, one of
the most pressing issues in Cambodia today is how will the country manage and distribute its natural
resources and for whose benefit.
Climate change impacts and disaster events (i.e. floods and droughts) further aggravate the situation,
disproportionately affecting the poor and rural population who are most dependent on natural
resources and least able to cope with adverse shocks. Moreover, the current structure of Cambodia’s
economy is such that it relies significantly on inputs from its natural capital. Sustainable harvesting of
5timber and non-timber forest products, rice production, tourism and clean water provision are
important pillars of the Cambodian economy that can only be maintained and developed on a firm base
of secured natural capital. Overall, the effective mainstreaming of environment, climate and disaster risk
reduction into climate relevant sectors such as forestry, fisheries, agriculture, industry, energy,
infrastructure, etc. remains challenging.
CMDG 8: Develop a global partnership for development3
No specific Cambodian targets have been set for this MDG, however a range of information and analyses
of trends in Official Development Assistance (ODA), trade, information and communication technologies
are available.
Development cooperation disbursements (ODA and NGO core resources) have generally trended
upwards over the past decade and amounted to USD 1.46 billion in 2013. Over the period 2004-2013
there have been year-on-year compound increases in support of 11.4% annually.
As the profile of development partners supporting Cambodia has changed, the modalities of support
have also changed markedly over the past decade. Over the past decade, while disbursements of the
technical cooperation projects - supporting government reforms, service delivery and capacity -
remained relatively unchanged throughout the period (ranging between USD 250-300 million annually),
the investment programmes (delivering physical investments such as infrastructure) however have
tripled from around USD 300 million in 2003/04 to more than USD 1 billion in 2013. This change in ratio
between grants and loans is consistent with the funding pattern in a country that is approaching the
middle-income status.
Many gains have been made on the global development effectiveness agenda, however much remains to
be done in a development partner environment that is still crowded and fragmented. In addition,
effective development cooperation also requires coordination across government and an integration of
strategic planning, budgeting and aid management. Mechanisms for dialogue at all levels also need to
ensure diversity of actors and the differential contribution of all stakeholders, respecting national
ownership while emphasising development results.
In terms of trade, Cambodia benefits from a regime of tariff-free imports to a number of developed
economies, including the European Union under the 'Everything But Arms' (EBA) regime. Cambodia’s
exports amounted to USD 6.8 billion in 2013 with the EU as the prime market for Cambodian products.
Garments and textiles exports continue to grow, however the biggest relative boom has occurred in the
rice and sugar exports.
The Association of South-East Asian Nations (ASEAN) integration in 2015 and Cambodia’s graduation
into Middle Income Country (MIC) status represent key considerations for medium-term development.
Cambodia is firmly progressing from low-income towards a lower-middle income status hence the Royal
Government is now aiming to build the necessary foundations of a middle-income country. As Cambodia
3
More information on development cooperation trends in Cambodia are available from the Council for the Development of
Cambodia who produce analytical work related to development effectiveness. See www.cdc-crdb.gov.kh
6approaches middle-income status the relative share of ODA in financing national development will
decline, and Cambodia will need to secure and maximise alternative funding sources to ensure
continuation of socio-economic development.
Cambodia's graduation from the Least Developed Country (LDC) status on the other hand, is a longer-
term prospect than the change in income status. Cambodia’s progress and reclassification will mean that
access to concessional finance and to favourable markets will be more limited and this does require
consideration to avoid the potential 'middle-income' country trap and ensure continued socio-economic
development.
CMDG 9: De-mining, UXO and victim assistance
Cambodia has made remarkable progress in reducing casualties from mines and UXOs. The annual
number of civilian casualties recorded has fallen from a record 4,320 in 1996 to 111 in 2013, hence
exceeding the current target of 461.
Large areas of contaminated land have been cleared, however since the contaminated area is greater
than originally expected, this target will not be achieved by 2015. Cambodia has also obtained an
extension to 2019 under the Convention on the Prohibition of the Use, Stockpiling, Production and
Transfer of Anti-Personnel Mines and on their Destruction. Almost all elements of a victim assistance
framework have now been adopted and implementation is under way.
1.2 PROGRESS ON KEY REFORM AREAS
Economic reforms
Growth remains strong driven by robust exports, tourism, and construction, despite the recent floods
and some slow down during the 2013 national election. Growth is projected to pick up to 7.25 percent in
2014 and reach 7.5 percent over the medium term along with global recovery, improvements in
infrastructure, competitiveness, and investment climate4. Stable food and fuel prices are expected to
keep inflation at around 3-4 percent in 2014. Medium-term economic wealth creation would continue
to come from export led expansion in the garment, footwear, tourism, rice, cassava and fisheries
sectors.
Foreign direct investment (FDI) plays an important role in supporting growth. The UN World Investment
Report listed Cambodia amongst the most successful LDCs in attracting FDI in 2012, reaching almost USD
1.6 billion, a year-on-year increase of 73%. However, it should be noted that FDI flows are volatile. The
report also named Cambodia as one of the emerging bright spots within the South-East Asian region,
particularly for labour intensive FDI and value chain activities. Looking at financial services, by value,
Cambodia attracted the largest amount of greenfield projects out of all LDCs worldwide in 2012.
Early signs of diversifying foreign direct investment could be bolstered with better infrastructure and
improved electricity supply as electricity costs in Cambodia remain very high, despite considerable
4
IMF Cambodia 2013 Article IV consultations, IMF Country Report No. 14/33, February 2014
7progress made in the energy sector. Supply also remains unreliable and presents an obstacle to
strengthening Cambodia’s competitiveness and economic development. The need for increasing nation-
wide electricity supply and extending the main grid into low population density areas presents an
additional challenge to reducing electricity tariffs.
Well-managed micro-finance institutions can make major contributions to poverty reduction and
employment creation. However, the successful penetration of microfinance has been mainly
concentrated in urban areas. The provision of sustainable microfinance services in rural areas, where the
majority of the Cambodia's poor live, remains weak. As a result, there are still substantial untapped
opportunities for microfinance institutions in Cambodia.
The impact of the global economic crisis has exposed the vulnerabilities of Cambodia's narrowly focused
highly open economic structure and limited options for productive employment. Structural reforms and
accompanying economic diversification is now a priority concern. With the projected higher growth rate
for the working-age population and more young people entering the labour force in the future,
achieving decent employment will increasingly become challenging. Moreover, there are serious
concerns about the quality of employment in Cambodia (a large share of which is in the informal sector)
related to low earnings and poor working conditions. Continued improvement in the business climate,
governance, and human capital, including through education and training, would provide support to
private sector development and boost employment creation.
Governance reforms
Cambodia is in the process of a peaceful political transition and the end of the political stalemate in mid-
2014 will provide the base for a meaningful progress towards building governance structures that are
accountable, predictable and transparent to the general public, which respect the Rule of Law,
encourage citizenship engagement and protect and promote human rights.
The Governance system in Cambodia remains overall characterised by weak institutions, hierarchical
decision-making and the formal system of loyalties and patronage. Progress however has been achieved
in the implementation of the public sector reform agenda, which can be linked to strong European
development cooperation support. Simultaneous implementation of the Public Financial Management
(PFM), Public Administration and Civil Service (PAR), Sub-National Democratic Development (SNDD) and
the Legal and Judicial institutional reforms is expected to contribute further to the enhanced public
governance.
The Public Financial Management Reform programme remains essential to finance vast development
needs without jeopardising fiscal sustainability. This reform will further strengthen revenue
administration through improved tax policies, while increasing the efficiency of public spending and the
quality of public services. The government is committed to studying the conditions for further disclosure
of budget documents to the public. In parallel, the Ministry of Economy and Finance (MEF) is further
enhancing budget integration (including loans and grants, recurrent and investment budgets), in
particular through the elaboration of integrated Budget Strategic Plans in 10 line ministries by 2015 and
subsequently in all sectors. The MEF is also committed to strengthen procurement procedures towards
a more transparent budget.
8Continuing low level of basic salaries in the civil service is hindering the development pace in Cambodia
as well as the achievements of the Public Administration Reform programme specifically. With the
recent creation of the new Ministry of Civil Service, however, compensation reform may receive the
needed impetus and the links may be strengthened between this pillar of the reform and improvements
in managing human resources in Cambodia’s public administration as well as introducing public service
standards.
The Sub-National Democratic Development Reform has possibly the greatest potential impact on the
development of democratic governance in Cambodia. The reform is proceeding, with considerable
financial support from development partners, however the organisation, structure and function of the
sub-national authorities are yet to respond fully to the needs and challenges of local economic
development and quality public service delivery. A well-organised decentralised system of governance
will contribute to an enhanced accountability and transparency at all levels.
The legislative framework generally meets international standards; however the practice of
accountability and transparency is not well developed. Reform of the Judiciary has been slow and
fundamental laws on the independence of the judiciary remain challenged. In addition, there is a limited
dissemination of knowledge of laws and a significant need for capacity building of law enforcement
personnel at all levels. Corruption is widespread and represents a significant obstacle to democratic
governance and sustainable development in Cambodia. An independent strengthened judicial system
will be the key for tackling endemic corruption.
The human rights situation is evolving in a generally positive direction, however the outbreak of and the
use of violence in early 2014 followed by a restriction on freedom of expression and assembly put the
evolving democratic system at risk. Impunity remains widespread and an independent strengthened
judiciary will be fundamental for the protection and promotion of civil and political rights.5 The
parliamentary reform is also critical for the further democratisation of the country and combined with
strengthened local authorities, an independent judiciary and a well-functioning parliament will serve to
better respond to any human rights violations.
Civil society is vibrant and there is a large number of NGOs that scrutinise the government and foster
demand for accountability, especially at the national level. Several of these are well-organised and
professional organisations, however many have overall little experience with fostering social
accountability. In recent years civil associations and community-based organisations have begun to
emerge at the local level fostering demand for governance and creating avenues for dialogue and
information exchange at the local level.
1.3 DRIVERS OF CHANGE
Considering the changes over the past decade, several drivers of change have emerged in Cambodia and
these need to be taken into consideration when planning development cooperation interventions.
5
See also: Report of the Special Rapporteur on the situation of human rights in Cambodia, Surya P. Subedi, August 2014
9Firstly, there has been a significant change in demographics. Of the approximately 9.5 million registered
voters, more than half are under 30 years old. These young people were born after the Khmer Rouge
regime and the civil wars that followed, which were the primary reference points for the population to
date. The Cambodian youth is looking forward and beginning to compare Cambodia's development to
that of other countries in the region, rather than to its own dark past. This has lead to a generational
shift in attitudes and voting allegiances. While the younger generation appreciates the economic gains
made in the recent years, they have also witnessed the consequences of growth which has left many
rural and urban poor people dispossessed and they want a greater share of the benefits of growth.
Women in Cambodia are highly active in economic life, but are not so well represented in the political
system. The increasing rate of urbanisation and the growing employment opportunities, especially for
young women in the textile industry, will in all likelihood lead to new social, political and economic
demands and challenges to traditional ways of thinking.
The power of media and especially social media has been growing fast. In terms of information and
communication technologies (ICT), the number of users of mobile phones and those with access to the
Internet have been increasing exponentially, however they are still far below regional averages. The
Royal Government is taking measures to ensure a continued rapid expansion in the use of these services
and their potential for development. With this increase, young Cambodians have been flocking to social
networks, facilitating the faster and wider flow of information.
Cambodia's vibrant civil society is also an important driver of change and plays a key role in Cambodia's
democratisation and in the promotion of human rights based approaches. However, a strong civil
society also depends on the complementary actions of reform-minded actors in the public service. Well-
educated and reform-oriented individuals now entering the public service could influence change in the
near future: there is an increasing awareness among civil servants that Cambodia needs to make radical
reforms in order to meet future development challenges and be in a position to take advantage of the
opportunities in the dynamic business environment. Local governments are also increasingly important
drivers of change in the context of the sub-national democratic development and provide a mechanism
for individuals to influence public policy and decisions that affect their daily lives.
Western development partners have a significant influence, primarily as trading and economic partners.
In September 2013, European Union took over the United States of America as the prime market for
Cambodian products on overall exports. The choices made by European buyers related to labour
conditions and standards are therefore increasingly important to key sectors of Cambodia's economy. In
the textile industry, trade unions play an increasingly important, although still limited, role in improving
the working conditions and therefore the livelihoods of people.
102. FOUNDATIONS OF THE EUROPEAN DEVELOPMENT COOPERATION STRATEGY
The priority areas of the European Strategy are based on the consideration of the Royal Government's
development priorities as expressed in the Rectangular Strategy - Phase III and detailed in the National
Strategic Development Plan 2014-2018; on shared values and principles, on the lessons learned from the
previous European development cooperation and on the European comparative advantage.
2.1 ROYAL GOVERNMENT'S DEVELOPMENT VISION AND FRAMEWORK
The Royal Government adopted a vision of a prosperous society with a strong economy that is
diversified, dynamic, and resilient, and where there is an equitable distribution of opportunities. The
Royal Government aim is that Cambodia reaches the upper-middle income country status by 2030 and
high-income status by 2050. The new Rectangular Strategy – Phase III will play a key role in building the
foundations to meet this vision. European partners are committed to aligning with the national strategy
and supporting the Royal Government in achieving this commendable vision.
The Rectangular Strategy- Phase III, with its central theme of Growth, Employment, Equity and
Efficiency reflects the ambition of the Royal Government to promote long-term sustainable national
development and poverty reduction through achieving the four Strategic Objectives of the Rectangular
Strategy – Phase III:
1) Promoting economic growth of at least 7% annually which will be sustainable, inclusive,
equitable and resilient to shocks;
2) Promoting employment, especially for the youth through increased competitiveness and
investment;
3) Promoting equity by 1% reduction in poverty incidence annually and achieving remaining
Cambodian Millennium Development Goals, prioritising human resources development and
sustainably managing natural resources;
4) Promoting efficiency by strengthening institutional capacity and governance and improving
public services.
Good governance is at the core of the Rectangular Strategy and the priorities in Phase III include:
Fighting corruption; Legal and Judicial Reforms; Public Administration Reform; and Reform of the Armed
Forces.
The four priority areas for action that will guide development efforts to achieve the objectives outlined
above are outlined as:
i) Agriculture development (diversification, value-added, productivity);
ii) Development of physical infrastructure;
iii) Private sector development and employment;
iv) Capacity Building and human resource development.
11The Rectangular Strategy – Phase III is an ambitious policy, in terms of its structure, coverage and
substance and it offers a sound basis for building a joint European response. However, the performance
monitoring aspect of the Rectangular Strategy – Phase III is weak as it is a policy statement rather than a
plan. Performance indicators are expected to be detailed in the National Strategic Development Plan,
which will operationalise the Rectangular Strategy, in the form a results framework. The Rectangular
Strategy – Phase III is relevant to Cambodia’s development challenges and represents an overall credible
and comprehensive policy framework which can be used as the basis for programming joint European
development cooperation and for coordination and dialogue between the European partners and with
other development actors.
In addition, the Royal Government has formulated a Development Cooperation and Partnerships
Strategy 2014-2018 that reflects the country's intended shift from a focus on aid effectiveness to a focus
on development effectiveness. This strategy outlines how Government intends to build inclusive
partnerships with all development actors, including private sector and civil society organisations and to
explore new partnering modalities such as south-south and triangular cooperation. This strategy also
introduces results-based approaches and provides opportunities for strengthened inter-sectoral
coordination.
2.2 SHARED VALUES AND PRINCIPLES 6
This European Strategy is based on the common values and principles shared by the European partners
and the Royal Government of Cambodia namely:
Development needs to be country-led – Country ownership and leadership of development
needs that are based on national strategies mobilising domestic resources and ODA and
ensuring consistency in all policy areas, to which development partners can align;
Overarching aim is poverty reduction - particularly focusing on the Millennium Development
Goals and on the post-2015 development goals. This will help meet other challenges such as
sustainable development, HIV/AIDS reduction, security, conflict prevention, forced migration,
etc.
Democratic values - respect for human rights, democracy, fundamental freedoms and the rule
of law, good governance, active citizens' participation, vibrant civil society, solidarity, social
justice and effective multilateral action, particularly through the United Nations.
6
These values and principles are enshrined in the international legal framework, in particular in the UN Human Rights
conventions, and in European and Cambodian legal frameworks, policies and guiding documents, including but not limited to
the Rectangular Strategy – Phase III, NSDP, Development Cooperation and Partnerships Strategy (2014-18), Paris Declaration,
Accra Agenda for Action, Busan Global Partnership for Development Effectiveness, Lisbon Treaty, European Consensus on
Development, Swiss development policy as defined in the Parliamentary Message on International Cooperation 2013–2016,
Council Conclusions on promotion of human rights, EU Code of Conduct on Division of Labour, the New European Pact for
gender equality 2011 – 2020, Council conclusions ‘The Future Approach to EU Budget Support to Third Countries, the Council
Conclusions on Europe’s Engagement with Civil Society, the Agenda for Change and European partners' inputs into Busan
12 Sustainable development – there needs to be a balance between activities aimed at wealth
creation, the protection of environment and natural resources and growth, which is sustainable
and benefits the population as a whole;
Conflict-sensitive program management - particularly in the post-conflict context of Cambodia,
identifying dividing and connecting forces in dynamic and heterogeneous contexts to help
mitigate the potential for social tension and unrest in sensitive contexts. Promoting platforms
for dialogue and exchange between different communities, civil society organisations and local
authorities will be an important means to support trust-and confidence-building;
Investing in people - primarily through high quality education and adequate health care is the
only guarantor of achieving long-term economic growth, poverty reduction and a resilient
society;
Gender equality - closing gender gaps in employment and education and addressing all forms of
violence against women is a vital factor and a precondition for reaching the full socio-economic
potential;
Partnership, transparency and mutual accountability - European partners and the Royal
Government of Cambodia's resources for development need to be efficiently deployed to
maximise their effectiveness. Transparency and accountability based on an open and inclusive
political dialogue are vital to achieving development results and ensuring effectiveness.
European partners will continue to work in partnership with the Royal Government of Cambodia as well
as with civil society and other development actors, to promote and facilitate development in line with
these values.
2.3 POLICY COHERENCE FOR DEVELOPMENT
This European Strategy is primarily relevant for the European partners' bilateral programmes in
Cambodia which are managed by their country or regional offices. European partners however consider
it important that all of their policies and programmes should support Cambodian efforts to achieve
sustainable development, the Millennium Development Goals and post-2015 development agenda.
European partners therefore adopted an approach of ensuring policy coherence for development by
taking into consideration the impact of non-bilateral programmes and non-aid policies.
With respect to non-bilateral programmes, European partners provide additional development
cooperation funds from a range of thematic and regional funds. This includes funding for civil society
capacity development, regional support for ASEAN and the Mekong River Commission, and regional
integration for the benefit of Cambodia. European partners also complement their bilateral programmes
by supporting education and skills development through the provision of scholarships, research
opportunities and academic cooperation.
With respect to non-aid policies in the context of trade and finance, European partners apply the
Generalised System of Preferences (GSP), which provide trade preferences to developing countries and
13confirm European markets as the most open market in the world for exports from least developed
countries. Under the Everything But Arms scheme, Cambodia is granted duty-free/quota-free access for
all products, except arms and ammunition.
In order to help Cambodia reap the benefits of trade agreements and promote regional integration, the
European partners have considerably increased their Aid for Trade (AfT) in recent years: collectively,
they are the largest provider of AfT in the world. European partners support Cambodia in its efforts to
comply with core human rights and international labour and environmental conventions, particularly
through the incentive-based GSP+ scheme. European partners also remain committed to supporting fair
and ethical trade schemes.
European partners encourage and support European companies in adhering on a voluntary basis to
internationally recognised guidelines for corporate social responsibility in their business operations in
Cambodia. European partners also continue at bilateral and multilateral level to pursue a balanced
intellectual property rights policy vis-à-vis developing countries, taking into account their level of
development and capacity.
The policy on raw materials attaches great importance to improving governance in developing countries
and ensuring that due revenues are received by governments and used in a transparent, development-
oriented way. European partners are therefore supporting raw materials transparency schemes such as
the Extractive Industries Transparency Initiative (EITI) and Forest Law Enforcement, Governance and
Trade (FLEGT).
At multilateral level, European partners have intensified their efforts to achieve progress on the Doha
Development Agenda, with a focus on concluding, at the 9th WTO Ministerial Conference, a Trade
Facilitation Agreement as well as agreeing on certain agriculture and development deliverables, some
specifically for LDCs.
With respect to climate change, European partners are the largest contributors to climate financing to
developing countries. They have also delivered on and surpassed their commitments to Fast Start
Finance which supports immediate action by developing countries to strengthen their resilience to
climate change and mitigate their greenhouse gas emissions, including those from deforestation. The
expected adoption of the 2015 Climate Agreement will guide European development cooperation in
Cambodia and establish a stronger framework to mitigate the risks of climate change on the country’s
development and help increase Cambodia’s resilience.
More details about non-bilateral programmes and non-aid policies are available in Annex B.
2.4 EUROPEAN PARTNERS' COMPARATIVE ADVANTAGE
European partners have comparative advantages in a number of areas based on the historical traditions
of European countries as well as on their long experience of development cooperation with Cambodia.
European partners also have a long-standing experience in applying policy coherence for development
and using a wide range of instruments in policy areas such as environment, trade, the information
14society and immigration to enable synergy, consistency and maximum effective use of resources for
promoting development.
Democratic governance tradition: Europe has a long history of building democratic culture based on
equality and participation, ensuring citizens' rights and accountable public administrations, including at
the local level. Periods of crisis across Europe have also given European partners an understanding of
how to contextualise democracy and good governance in a range of institutional contexts.
Human rights-based development: Commitment to human rights has been a corner stone of European
partners' development cooperation for a long time and this has been made explicit in European legal
and policy commitments to put human rights at the centre of our relationship with partner countries:
these commitments are clearly spelt out in the development and trade instruments.
Regional integration: The European Union is the most advanced example of regional integration
including the free movement of persons, goods, services and capital and set up an economic and
monetary union. As such European partners are well-placed to support initiatives such as the ASEAN
Economic Community and to understand the impacts that regional integration can have on countries
with differing levels of socio-economic development.
Social protection and welfare: Geographical and historical comparisons of social welfare show that
Europe has historically played a leading role in the development of social protection and welfare
schemes, provision of social services, including health and education, and human resource
development. European partners' knowledge and experience is directly valuable for supporting
development of high quality and capable human resources to meet the immediate and long-term needs
of economic growth and improving competitiveness of Cambodia.
Public service reforms: European public services have undergone significant reforms over the past three
decades which makes European partners uniquely positioned to share their experience and provide
support for public service reforms.
Technology and scientific development: Europe is at the cutting edge of technology development,
including telecommunications, e-commerce and social networking. Hence, the evolving technology
sectors, such as telecommunications, in Cambodia and the ASEAN region, provide an opportunity to
exchange useful lessons and experiences.
2.5 LESSONS LEARNT FROM PREVIOUS DEVELOPMENT COOPERATION
With respect to general lessons, these note that post-conflict transition is a process that is not linear; it
takes time for the deeper impacts and fragilities to be addressed. Cambodia is now twenty years on
from the formal end of the conflict, yet some fragilities persist, reinforced by deeper social norms, whilst
new fragilities have emerged as the state becomes dominant, creating new tensions and risks of social
conflict.
State building as a means of ensuring stability needs to be balanced with civil society development as a
means of building accountability and social cohesion. Stability requires a capable, accountable and
responsive state, positive state-society relationships and an atmosphere of safety, security and choice in
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